Bogus investor accepts plea deal

Diane Dietz

Wednesday

Mar 30, 2011 at 12:01 AM

Louis “Jim” Borstelmann stole from the community of Florence when he took $19 million fraudulently, mostly from investors who live in the small coastal town, a victim told U.S. Judge Michael Hogan at Borstelmann’s plea hearing Tuesday in Eugene.

Shorn of their retirement funds, the affected Florence residents in coming years won’t have donations for their churches or civic organizations such as Habitat for Humanity, said Jerry Medler, a retired University of Oregon professor, whose wife lost $900,000 to Borstelmann’s scam.

Borstelmann, 68, who lives in Thousand Oaks, Calif., pleaded guilty Tuesday to one count of mail fraud and one count of money laundering. Twenty-four additional counts were dismissed in a deal with the federal prosecutors.

The maximum sentence that Borstelmann could face is 30 years in prison with a $500,000 fine.

Hogan said he will review several factors — including the $19 million toll, the number of victims, the fact that Borstelmann engaged in money laundering to hide his ill-gotten gains and the sophistication of his operations — when sentencing Borstelmann on June 14.

“As part of his plea, the defendant admitted that the alleged investments never existed and that it was all a Ponzi scheme — he used new investor money to pay existing investment obligations,” U.S. Attorney Dwight Holton said in a news release following Borstelmann’s pleas. Borstelmann “further admitted to spending investor money on personal items, including a car and a home,” Holton noted.

“This scheme targeted vulnerable families who put their money and trust behind a man who promised them a bright future,” said Arthur Balizan, FBI special agent, in the same statement. “They now face a future of hardship because of these lies.”

Borstelmann still faces prosecution in Ventura County, Calif., but the prosecutor there has said he would forgo prosecution as long as Borstelmann receives a federal sentence in Oregon of at least nine years.

Many of Borstelmann’s investors are expected to weigh in at his sentencing hearing in June.

For 30 years, Borstelmann loaned money to homeowners in Ventura and Los Angeles counties through his company, Sunburst Associates.

The loans were secured by the borrowers’ then-rapidly appreciating property.

He got the money he loaned from investors — including 80 in Florence — whom he promised at least a 10 percent annual return. That would mean, for instance, that an investor with $60,000 in Sunburst would get $500 per month.

For years, the investors got monthly interest payments “like clockwork,” according to court records.

But the business model came apart in 2008 amid plummeting California home prices and borrower defaults.

Borstelmann was accused of providing fake marketing materials and mortgage documents to investors. In some cases, the marketed property was nonexistent, according to court records, so those loans were unsecured.

Borstelmann used the proceeds for himself, court records show. He wrote more than $100,000 worth of checks to his wife, his credit card company and for a loan that he owed.

Borstelmann has forfeited his 2005 Lexus and his condominium in Thousand Oaks; the condo will be sold unless he comes up with $100,000 to make up for the ill-gotten money put into the home, according to the plea agreement.

The Borstelmann prosecution was a product of the Obama administration’s Operation Broken Trust initiative, a nationwide operation launched in August that targeted investment fraud.

“The citizens who are defrauded in schemes like this are quite often left financially and emotionally devastated,” Marcus Williams, IRS criminal investigation special agent, said in a written statement. Investigators from the FBI and state of Oregon assisted the IRS, Williams said.

After pleading guilty Tuesday, Borstelmann stood behind a glass courtroom door and waited until about a half-dozen of his one-time investors filed out of a second courtroom door. Only then did Borstelmann emerge.

Despite a victim’s urging that he be jailed, he remains free until his sentencing. He declined comment on the day’s events.

Never miss a story

Choose the plan that's right for you.
Digital access or digital and print delivery.

Original content available for non-commercial use under a Creative Commons license, except where noted.
The Register-Guard ~ 3500 Chad Drive, Suite 600, Eugene, OR 97408 ~ Privacy Policy ~ Terms Of Service